How to pay contractors in the United Kingdom

How to choose: four questions for paying a UK contractor

1. Does your company have anything in the UK? This decides who answers the IR35 question. A client that is not UK resident and has no UK permanent establishment is wholly overseas, and the client-side rules in Chapter 10 ITEPA 2003 do not apply to it. The contractor’s own company then assesses whether IR35 applies under Chapter 8 (HMRC ESM10025, updated July 2026, checked 2026-09-29). If it does, that company works out a deemed employment payment, with a flat 5% deduction for running costs, and pays the tax itself (gov.uk, checked 2026-09-29).

A UK branch or office is a permanent establishment, and HMRC notes that the contractor’s UK company is not one (ESM10025). With a branch, a medium or large client decides status and issues a Status Determination Statement. HMRC’s manual defines medium or large as two of: turnover above £10.2 million, balance sheet above £5.1 million, more than 50 employees (ESM10006, checked 2026-09-29). The Companies Act limits behind that test rose to £15 million and £7.5 million for accounting periods from 6 April 2025, which RSM expects to apply to most companies from the 2027/28 tax year (rsmuk.com, checked 2026-09-29).

If you have no UK presence: any rail or contractor platform. If you have a UK branch and pass the size test: you need a status determination per contractor, so choose a platform or a Contractor of Record that keeps it with the contract.

2. Sole trader or limited company? IR35 concerns work through an intermediary, so it does not reach a sole trader. That person’s status is judged directly, and UK employment law has its own statuses: someone who must do the work personally, with only a limited right to send a substitute, can be a worker owed the National Minimum Wage and paid holiday (gov.uk, checked 2026-09-29), whatever the tax position.

A limited company invoices in its own name, is paid into an account in its registered name, and signs a W-8BEN-E if you are a US payer.

If you pay a sole trader with several clients: a bank transfer or Wise, with a contract that leaves substitution and working methods to them. If you pay a limited company: check the payee name against its Companies House record before the first payment.

3. What currency do you pay from? If you hold GBP in a UK account, pay by Faster Payments. From USD, Wise quoted USD 3.88 to deliver USD 1,000 as GBP from a Wise balance and USD 5.89 funded by ACH debit (wise.com, checked 2026-09-29).

A SWIFT wire into a GBP account costs the contractor on arrival. Barclays charges £6 to receive an international payment over £100 and, when it converts, a charge of up to 2.75% for personal customers (barclays.co.uk, checked 2026-09-29). EUR sent by SEPA or from the EEA escapes the fee there, and the UK remains in the SEPA schemes (EPC list, checked 2026-09-29).

If the contractor invoices in GBP and you hold USD: a provider that converts at a disclosed rate and pays out locally in GBP. If you hold EUR and the contractor has a EUR account: SEPA.

4. One contractor, or a team where status matters? Platform pricing is a percentage per payout or a monthly seat. On a USD 5,000 monthly invoice, a 3% fee is USD 150, a seat costs USD 19–49, and Wise charges USD 17.04 from a balance (wise.com, checked 2026-09-29). Percentages suit small or irregular invoices.

A team working full time on your product raises the status question for each person. 4dev acts as Contractor of Record — the contracting party for each contractor — which reduces reclassification risk. Deel, Remote, Multiplier and Native Teams sell Contractor of Record products too; read the liability clause in the contract, not the product name. Skuad and Payoneer sell an Agent of Record. For a role that is really employment, an Employer of Record such as Deel, Remote, Multiplier, Oyster or Skuad employs the person instead.

If you pay one independent contractor: your bank or Wise. If you pay a team: a contractor platform with a document flow. Compare the field in the contractor payouts rating.

Payout rails into the UK in 2026

Sources: Faster Payments from Pay.UK; CHAPS hours and the 2027 extension from the Bank of England; Barclays fees from barclays.co.uk; the UK’s place in SEPA from the EPC country list; Wise figures from its price calculator and business page (all checked 2026-09-29).

There is no exchange control: it was abolished in October 1979 (Hansard). Banks still screen payments for sanctions and fraud.

What the UK contractor needs to get paid

Sources: set up as a sole trader, register for Self Assessment, income tax rates, self-employed National Insurance, register a company, corporation tax rates, tax on dividends, all gov.uk, checked 2026-09-29.

To receive money the contractor gives you a GBP account in their own name or the company’s: sort code and account number, or IBAN and BIC for a payment from abroad. The invoice shows the legal name, address and, if registered, the VAT number.

IR35, employment status and IP terms: our hiring guide.

Documents and tax on your side

Withholding. None for a client outside the UK. A sole trader pays income tax and National Insurance through Self Assessment. A limited company pays its own tax, including any IR35 deemed employment payment when you are wholly overseas (HMRC ESM10025, checked 2026-09-29).

VAT. For a B2B service the place of supply is where the customer belongs, so an invoice to a business abroad carries no UK VAT (VAT Notice 741A, section 6.3). HMRC says the best evidence that an EU customer is in business is its VAT number. You account for any tax under your own country’s rules, such as a reverse charge in the EU. The UK standard rate is 20% and registration applies above £90,000 of taxable turnover over 12 months; a contractor who only supplies out-of-scope services does not have to register (gov.uk, checked 2026-09-29).

US payers. Collect Form W-8BEN from a sole trader and Form W-8BEN-E from a limited company. The IRS sources pay for personal services to the place the work is done, and foreign-source income paid to a non-resident needs no NRA withholding or 1042-S (irs.gov; irs.gov, checked 2026-09-29), so a UK contractor gets no 1099. The US–UK treaty was signed on 24 July 2001 and entered into force on 31 March 2003 (congress.gov). It has no independent personal services article; that income falls under business profits (Treasury technical explanation, checked 2026-09-29). It matters only if the contractor works while in the US.

What to keep, per contractor:

1. The signed services contract with scope, rate, currency and a written IP assignment signed by the contractor.
2. Each invoice, and for EU payers the evidence that the supply was B2B.
3. Proof of payment matching each invoice.
4. W-8BEN or W-8BEN-E (US payers), and a note of where your company is resident and that it has no UK branch or office.

Where payments to the UK break

• Name mismatch on Confirmation of Payee. When a provider pays from a UK account, the payer’s bank checks the name against the account and gets a match, a close match, no match or unavailable. The check covers domestic CHAPS, Faster Payments and Bacs payments only, and a business account needs its registered or trading name (Pay.UK, checked 2026-09-29). A limited company’s account is in the company’s name, so a platform profile set up in the contractor’s personal name can return no match.
• USD sent to a GBP account. The receiving bank converts at its own rate: up to 2.75% at Barclays for personal customers, plus £6 on payments over £100.
• Large amounts over Faster Payments. The £1 million scheme limit is rarely the constraint; the bank’s own limit is. A quarterly invoice or a team batch can fall back to CHAPS, which settles only on weekdays until 18:00.
• A UK office opened mid-contract. A permanent establishment makes a medium or large client responsible for status under Chapter 10 from the next tax year, since HMRC tests the UK connection immediately before the tax year begins (ESM10006, checked 2026-09-29).
• An invoice with UK VAT on it. A VAT-registered contractor who adds 20% to a service for a business abroad has applied the wrong place of supply; ask for a corrected invoice before paying.
• A sole trader treated as an employee. IR35 does not cover them, but employment law still can: fixed hours, your tools and no right to send a substitute point to worker or employee status. See contractor misclassification and the Contractor of Record rating.